Don't Miss the Tax Deadline: File for an Extension

Penalties for Failing to File and Pay



Failure-to-Pay Penalty

The failure-to-pay penalty runs at 0.5% for each month (or part of a month) the payment is late. For example, if payment is due April 15 and is made May 25, the penalty is 1% (0.5% times 2 months or partial months). The maximum penalty is 25%.

Failure-to-File Penalty

The failure-to-file penalty is more severe, running at 5% per month (or partial month) of lateness to a maximum of 25%. However, if you file for an extension on Form 4868, you're not filing late unless you miss the extended due date.

Combination of Penalties

If both the failure-to-pay and failure-to-file penalties apply, the failure-to-file penalty drops to 4.5% per month (or part) so the combined penalty is 5%. The maximum combined penalty for the first five months is 25%. Thereafter, the failure-to-pay penalty can continue at 0.5% per month for 45 more months (an additional 22.5%). Thus, the combined penalties can reach a total of 47.5% over time.

Exceptions and Abusive Situations

Both penalties may be excused by the IRS if lateness is due to "reasonable cause" such as death or serious illness in the immediate family. In particularly abusive situations involving a fraudulent failure to file, the late filing penalty can jump to 15% per month, with a 75% maximum.

If you have any questions about filing Form 4868 or navigating the complexities of IRS penalties, the experts at Freese, Peralez & Associates are here to help. Contact us today to ensure you stay compliant and avoid costly mistakes.

Conclusion

Don't let the tax deadline catch you off guard. If you're not ready to file by April 15, consider filing for an extension to give yourself more time. But remember, an extension only applies to the filing, not the payment. Freese, Peralez & Associates can guide you through the process and help you minimize any potential penalties. Reach out to our team today to get started.